JUST as the Chancellor, Philip Hammond, was approaching peak boredom after speaking for more than an hour and a quarter, the nation suddenly woke up. “I am going to abolish the Autumn Statement”, he announced. Great! An end to the annual exercise in self-serving public relations that was turned into an alternative Budget by the former Labour chancellor, Gordon Brown, so that he could have two chances to over shadow Tony Blair.
But no sooner had Mr Hammond announced that the statement was unnecessary than he said he was going to put a spring statement in its place. In other words, there was no change. Deck chairs rearranged on the Titanic was the universal response, though it was surely worse than that. At least deck-chair rearrangement made people a little more comfortable as they awaited their doom.
Does the Chancellor have a wicked sense of humour? Is he trolling us, to use the social media argot? He also announced that he was allocating funds to save a stately home, Wentworth Woodhouse, which sounds like a character out of an Agatha Christie novel. Was this a sly dig at those who’d criticised the cost of refurbishing Buckingham Palace? Was an alt-right chancellor looking for fun by annoying social liberals?
I suppose he had to do something to divert attention from the dismal long-term state of the post-Brexit British economy. The “black hole” cost of leaving the EU has apparently risen to £122 billion from only £100bn a week ago, according to the independent Office of Budget Responsibility (OBR), though that is a rough estimate.
The uncertainty of Brexit means that no one has a clue what will happen to the economy, least of all the Government. It’s not the next Autumn Statement that Mr Hammond should have scrapped but this one. Almost everything he said yesterday was irrelevant and what wasn’t was widely known. He produced mostly fantasy figures dreamed up to maintain a pretence of economic continuity.
All we do know is that, instead of abolishing the budget deficit by 2020 and running a surplus thereafter, the balanced budget has been pushed off to the never-never of the next Parliament. Now, this is strange because I seem to remember that, in 2015, the former chancellor, George Osborne, made a balanced budget a legal requirement when the economy is growing; which it is, just.
There was no mention of Chancellor Hammond going to jail and not passing Go, so I suppose the mandatory surplus was just another of those “post-truth” policies that are so fashionable at present; like the £350 million a week that is supposed to be saved by leaving the European Union. You may recall that figure being prominently displayed on the Foreign Secretary, Boris Johnson’s, Big Red Bus.
Mention of it was there none in Mr Hammond’s speech. You would have thought a saving of £16bn a year might have been worth a mention somewhere in an Autumn Statement, the central message of which was that the UK deficit is set rise to 90 per cent of GDP – a figure that his predecessor, George Osborne, said would lead to financial collapse on the Greek model.
But that was then and this is now. Apparently, debt doesn’t matter as much as it used to. The economy needs “headroom” to cope with the uncertainty of Brexit. Also, we need £23bn to invest in infrastructure and a few billion pounds for the Jams, families that are Just About Managing.
Some might say that this Autumn Statement confirmed that austerity, as practised by the Tory Government after 2010, wasn’t an economic necessity after all but a deflationary assault on the public sector that had no real economic rationale.
Mr Hammond is belatedly doing what Labour and the SNP urged in the 2015 General Election campaign: he is allowing UK public borrowing to increase, marginally, in order to release funds for investment. Mind you, no one expected that most of it would be used to plug a hole in the finances caused by leaving the EU
Yes, there will be a slight reduction in the severity of the Universal Credit benefit cuts, the minimum wage is up a few pence and personal allowances are to be raised to £12,500, all pre-announced. But I don’t think those battling families living precariously between £15,000 and £30,000, seemingly the main focus of political attention, will notice much difference. Mrs May insisted that this statement would prove she’s governing in the interests of the less well off, not “the privileged few”, though that might be hard to square with cutting business taxes to 17 per cent.
In fact, the only real certainty the Jams can look forward to is a continued erosion of their living standards as inflation rises next year to three per cent or so. Wage growth is stalling. Supermarkets warn that food price inflation is going to be much higher; between five and eight per cent, according to Sainsbury’s. This is good news for the German-owned discount chains like Lidl and Aldi.
The Germans just seem to do everything more efficiently. According to Mr Hammond, it takes five days for every British worker to produce what a German worker does in four. This is not because they work harder but because of our out-dated technology and management. It’s also because British workers are a lot cheaper than machines.
Poor productivity is partly why the British economy will slow to a snail’s pace. The OBR’s tentative forecast of 2.4 per cent less growth by 2020 may not sound like much but the Institute for Fiscal Studies calculates that this is equivalent to Britain producing £50bn less stuff in the next three years, or £1,700 per household, which sounds like serious money. The Jams can console themselves that so-called salary sacrifice schemes are to be abolished whereby some lucky workers were able to get their employers to pay for gym memberships and mobile phone contracts. This might be difficult to enforce in places where in-house benefits are reputed to be quite generous such as, er, the House of Commons. MPs’ expenses will be scrutinised even more closely.
The Scottish budget will be coming in a few weeks time and the Scottish Finance Secretary, Derek Mackay, will have a bit more to spend thanks to the investment announced on infrastructure, transport, 5G technology and other gubbins. Thanks to the Barnett Formula, this will create £800m in Scottish headroom. All of Scotland’s cities, will have City Deals, which I am sure is a good thing, though there is considerable vagueness about what these deals amount to.
There was an air of studied vagueness about everything in the Autumn Statement. The fog of Brexit hung over yesterday’s speech like a dark cloud. After the EU referendum in June, we were told repeatedly that the British people were not voting for lower living standards.
But that seems to be exactly what they are going to have. The only doubt is by how much the UK economy is going to suffer, at least in the medium term, as a result of this extraordinary act of economic self-harm.